Thursday 6 December 2012 05.17 EST
First published on Thursday 6 December 2012 05.17 EST

George Osborne has denied that the poor are bearing the brunt of his austerity measures following plans for a new round of deep cuts in welfare and Whitehall spending, insisting that the rich are paying "a greater share".

The chancellor also rejected accusations that he had fiddled the figures to make the government's finances look better and played down fears that the UK's credit rating could be downgraded.

Plans to cut £3.75bn a year off the government's welfare bill by uprating benefits for Britain's poorest families by just 1% a year until 2015 was one of the biggest money-raising measures outlined by the chancellor in autumn statement, after he admitted Britain's ailing economy had left him unable to meet the government's targets for repairing the public finances.

Measures targeting high earners included cutting the amount they can put into their pension pot tax-free from £50,000 to £40,000, from 2014, raising £1bn, and increasing the threshold for paying the higher rate of income tax by just 1% a year would raise a further £1bn.

The chancellor told MPs that limiting benefit increases, a fresh £31bn squeeze on government departments after 2014 and tax increases aimed at the better off were unavoidable if Britain was to cut its borrowing. He sought to soften the blow by raising the tax-free personal allowance on income by £235 to £9,440.

The Resolution Foundation said the main measures unveiled on Wednesday would mean the poorest 10% would lose 1.2% of their income, while the richest 10% would lose just 0.2%. Labour's Ed Balls pointed out that the cuts in the welfare bill would not only hit those out of work, but those in work but in receipt of tax credits due to low wages.

Osborne insisted that the richest 20% of people in the country were losing a greater share of their income – just over 4% – as he outlined measures to hit top earners that he said had not been "particularly easy or pleasant things to do".

During often tetchy and heated exchanges with Evan Davies on BBC Radio 4's Today programme, he said: "We are asking all parts of the population to make a contribution. You can't deal with the biggest deficit since the second world war without asking for a general contribution from the whole population. But as I say, the richest 20% are paying the most."

Osborne pointed to measures to clamp down on tax avoidance and evasion, to claw back money "back from people who should have paid their taxes", including a £3bn cheque from Swiss banks next year as a result of a treaty.

Citing the curbing of tax relief on pensions and uprating the higher rate of tax rates by just 1%, he said: "There's a whole set of measures there. None of them are particularly easy or pleasant things to do. I've never claimed that they are. But when you are faced with a very large budget deficit, when you are faced with a state that is consuming too much of the national income, what do you do about that? What you do is you seek savings across the board and that is precisely what we have done."

He added: "If you look at the net effect of this we are on the side of people who want to work hard and get on."

He said the government had made a decision to protect pensioners from austerity measures, but ducked questions on whether this stance would continue into the next parliament.

He said protecting pensioners was a "sort of societal judgment".

"So we made a judgment as a government that we want to help and protect pensioners, but we are asking for more from the working-age benefits – not disability benefits, which will also go up with inflation – but across working-age benefits, we've suggested they go up by 1%, and as I said earlier the tax threshold, for example the higher rate, go up by 1%."

Balls told Sky News that 60% of the people who have been hit by cuts announced on Wednesday are in work as he criticised Osborne's decision to plough ahead with plans to cut the top rate of income tax from 50p to 45p next April.

Balls claimed that someone on £228,000 would benefit from £75 a week next April. "That's more than somebody who's looking for work is living on," he said.

"But, the reality was he had said that borrowing was falling only because he slipped in £3.5bn from the 4G mobile sale, which he didn't even mention in the speech and the reason is he knew it would be seen as a dodge."

Osborne dismissed the claim as a "red herring".

He told Today the government had dealt with the receipts of 4G sale in exactly the way the Office for Budget Responsibility (OBR) wanted the Treasury to, and that the government had followed "exactly the practice the Labour government had done when it scored the 3G receipts".

"Frankly I think it's been a bit of a red herring over the past 24 hours," said Osborne.

The chancellor delivered his statement amid heavily revised-down forecasts from the OBR that the economy would contract by 0.1% in 2012 and grow by just 1.2% in 2013 – the weakest post-recession performance in Britain's postwar history.